EUR/CHF likely to gradually drift higher towards 1.11 by end-2017

The reduction in political uncertainty after the outcomes of the Dutch and French election and the associated drop in safe-haven related flows, has alleviated the upward pressure on the Swiss franc, noted Lloyds Bank in a research report.

However, the U.K.’s upcoming election, along with the beginning of Brexit negotiations increase the changes that an additional wave of political even risk might lead to renewed inflows into the Swiss franc. With the deposit rate at -0.75 percent, the Swiss National Bank is expected to refrain from cutting the interest rates further to curtail the rise of its currency in this scenario. Instead, the Swiss National Bank President Thomas Jordan has promised to continue using direct foreign exchange intervention as the main tool to counter the appreciation of CHF.

“In the absence of a marked rise in inflows, EUR/CHF is expected to gradually drift higher, ending the year around 1.11”, added Lloyds Bank.